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    BUSINESS & TRADE                                                   FEBRUARY 13, 2026       |  The Indian Eye 34

             Global Disinflation and Domestic

                 Caution Shape Rate Outlook in

                                           US and India: SBI

                 Weak US demand strengthens the case for Fed cuts, while RBI is expected to stay put amid

                                                         volatility and global uncertainty

            OUR BUREAU                                                                                            the US Federal Reserve, the report
                                                                                                                  said.
            New Delhi
                                                                                                                      In contrast, SBI’s assessment of
                   isinflationary  forces  in  the                                                                India’s  monetary  outlook  points  to
                   United   States   are   like-                                                                  continuity  rather  than  change.  The
            Dly  to  persist  through  2026,                                                                      report said the Reserve Bank of In-
            strengthening  the  case  for  interest                                                               dia’s  Monetary  Policy  Committee
            rate cuts by the US Federal Reserve,                                                                  (MPC) is likely to maintain a status
            even as India’s central bank is expect-                                                               quo on the repo rate in its policy an-
            ed to maintain a cautious pause on                                                                    nouncement  scheduled  for  Friday,
            policy  rates  amid  currency  volatility                                                             citing  persistent  global  uncertainty,
            and global uncertainty, according to                                                                  pressure on government bond yields
            two assessments by the State Bank of                                                                  and volatility in the rupee.
            India (SBI).                                                                                              Since the last policy meeting, a
                In its report on the US economy,                                                                  major positive development has been
            SBI said a combination of weakening                                                                   the finalization of the India-EU and
            labor  market  conditions,  stagnant   A major positive development has been the finalization of the India-EU and India-US trade   India-US trade deals, which sharply
            household incomes, fragile monetary                                                                   reduced tariffs on Indian goods from
            trends and slowing economic activity                        deals (ANI file photo)                    50  per  cent  to  18  per  cent.  The  re-
            is  expected  to  keep  inflation  pres-                                                              port said India now enjoys one of the
            sures  subdued  in  the  coming  year.  from USD 17,890 in January 2025 to   peak and stood at 76.26 per cent in   lowest  tariff  regimes  among  Asian
            The report outlined seven key factors   USD 18,040 in December 2025. Such   December  2025.  Lower  utilization   economies, a move expected to boost
            that could push the Federal Reserve   limited growth suggests that US con-  levels point to weaker industrial ac-  export competitiveness and improve
            towards easing monetary policy.   sumers  are  entering  2026  with  con-  tivity and reduced pricing power for   trade prospects.
                At  the  heart  of  the  disinflation   strained  purchasing  power,  which   producers,  reinforcing  the  disinfla-  However,  the  global  outlook
            narrative is a gradual but sustained   could dampen consumption demand   tionary trend.               remains  fragile.  SBI  pointed  to  the
            softening  of  the  US  labor  market.  and reduce inflationary momentum.  The  report  also  examined  the   Geo-Economics Stress Index, which
            The  unemployment  rate  has  risen   Monetary  conditions  also  re-  role of tariffs, noting that while they   suggests  that  heightened  uncertain-
            steadily from an average of 3.6 per   main fragile. The report noted that   are often viewed as inflationary, Fed-  ty  typically  translates  into  econom-
            cent  in  2023  to  4  per  cent  in  2024,  year-on-year  growth  in  commercial   eral Reserve research suggests higher   ic stress with a lag of three to four
            before  climbing  further  to  4.4  per   and  industrial  loans  has  stayed  in   tariffs can suppress economic activi-  months, indicating downside risks in
            cent by December 2025. This trend   negative  territory  throughout  2025.  ty and increase unemployment, ulti-  the near term.
            suggests that labor market tightness,  Persistent contraction in loan growth   mately  exerting  downward  pressure   Commodity  prices  add  anoth-
            which  had  previously  supported   reflects subdued business investment   on prices. However, it cautioned that   er layer of complexity. Metal prices
            wage  growth  and  consumption,  is   and tighter credit conditions, both of   tariff hikes can also heighten uncer-  have rebounded after a sharp sell-off
            easing.                           which act as brakes on economic ex-  tainty,  weaken  business  confidence   last week, complicating the inflation
                The report also highlighted that   pansion and price pressures.  and trigger asset price corrections.  and growth outlook for policymakers.
            the  ratio  of  part-time  to  full-time   On  the  fiscal  front,  the  with-  Finally,  SBI  highlighted  the   On  inflation,  SBI  said  revised
            household  employment  has  re-   drawal  of  stimulus  is  another  dis-  growing disinflationary impact of ar-  CPI weights could lead to a margin-
            mained broadly unchanged between   inflationary  factor.  The  US  federal   tificial intelligence. As firms increas-  al increase of  20–30 basis points in
            December 2024 and December 2025.  budget  deficit  has  narrowed  signifi-  ingly substitute labor with AI-driven   headline  inflation,  though  months
            This stagnation indicates a slowdown   cantly, from USD 2.7 trillion in 2021   processes,  productivity  gains  could   with  higher  food  inflation  may  see
            in full-time job creation, reinforcing   to  USD  1.7  trillion  in  2025.  While   lower costs and prices. At the same   the new index print slightly lower.
            signs  of  cooling  labor  demand  and   this  signals  fiscal  consolidation,  it   time,  the  shift  may  suppress  wage   Amid these mixed signals, SBI
            weakening  bargaining  power  for   also  implies  reduced  government   growth, potentially weighing on over-  concluded that the RBI is likely to
            workers.                          spending  support  for  the  economy,  all economic growth.         retain  a  cautious  stance  and  keep
                Adding  to  this  pressure  is  the   potentially curbing demand further.  Taken  together,  these  factors   policy rates unchanged.
            stagnation in real disposable person-  Industrial indicators tell a similar   suggest  that  disinflation  is  likely  to   The  MPC  meeting,  underway
            al income. According to SBI, real dis-  story. Capacity utilization in the US   persist  into  2026,  strengthening  the   from February 4 to 6, will announce
            posable income rose only marginally   has  declined  steadily  from  its  2022   argument  for  eventual  rate  cuts  by   its decision on Friday.

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